White Collar Defense and Compliance : New Jersey White Collar Defense Lawyer & Attorney : Fox Rothschild Law Firm : Criminal Defense, Insider Trading, RICO, Consumer Fraud : New Jersey, New York City

Much has been written in the academic and scientific literature about the accuracy, or apparent inaccuracy, of eyewitness identification, particular cross-racial identification. Some have called for a Daubert-like gatekeeper role for trial judges. But the Supreme Court last week in Perry v. New Hampshire clarified the test for the admissibility of eyewitness identifications without requiring any general gate-keeping function. In an opinion by Justice Ginsburg, the Court held that the Due Process Clause, under most circumstances, does not require a trial judge to screen eyewitness identification evidence for reliability before allowing the jury to assess its creditworthiness. The Due Process Clause only requires a preliminary judicial inquiry into the reliability of an eyewitness identification when the identification was procured under unnecessarily suggestive circumstances arranged by law enforcement.

In Perry an eyewitness was asked at the scene for a more specific description of the man that she had seen breaking into her neighbor’s car, and pointed to the defendant while he was standing next to a police officer in the parking lot where the car was parked. The witness had identified the defendant in the equivalent of what, if arranged deliberately by the police, would have been an improper one-man line-up. But the eyewitness had voluntarily and spontaneously identified the defendant without being asked by the police to identify him. Because there was no improper police influence affecting the eyewitness’s identification in this case, the Court held that the identification procedure was not suggestive and unnecessary, and that the eyewitness testimony was, therefore, properly placed before the jury without a preliminary judicial assessment of its reliability.

The Court also held that, even when a suggestive and unnecessary identification procedure is used, suppression of the resulting identification is not automatic. Where there has been improper police conduct, the trial judge must screen the identification evidence for reliability before trial. After screening the evidence for reliability, the judge should only suppress the resulting identification if the “indicators of [a witness’] ability to make an accurate identification” are “outweighed by the corrupting effect of the improper police conduct.” In other words, the trial judge should only suppress the identification evidence if the improper police conduct created a “substantial likelihood of misidentification.” Otherwise, the identification evidence should be submitted to the jury. 

(Jana Volante, Esq., the author of this entry, is an associate with Fox Rothschild LLP, based in our Pittsburgh, PA office. Her practice concerns white collar criminal defense and commercial litigation)

 

• Print
• Comments
• Trackbacks
• Share Link

The Third Circuit Court of Appeals this week reaffirmed the limited circumstances under which a duty to disclose arises under Rule 10b-5, rejecting in a criminal case the Government’s theory that a fiduciary duty attaches to “high corporate executives” obliging them to correct alleged misstatements by others in management.

The case of United States v. Schiff, 2010 WL 1338141 (3d Cir., Apr. 7, 2010) involves the prosecution of two former top executives of Bristol-Myers Squibb. Frederick Schiff, former CFO, and Richard Lane, former president of a Bristol-Myers unit, were both indicted on conspiracy and securities fraud charges related to statements and alleged omissions in 2002 concerning the company’s business practice of incentivizing its wholesalers to purchase and inventory more products than were needed based on actual demand. The Government maintained that this practice fraudulently inflated corporate sales in the short term, and was covered up in public pronouncements to analysts and in the company’s filed financials.

On appeal was the district court’s dismissal of a Government theory that Schiff could be convicted for failing to correct misleading statements as to wholesale inventory levels made by Lane on analyst calls. The Court of Appeals affirmed the lower court’s rejection of any duty to speak in order to correct another’s statements, emphasizing that in only three scenarios does a duty to disclose arise: (a) insider trading; (b) a statutory requirement of disclosure; and (c) an inaccurate, incomplete, or misleading prior disclosure by the same individual. The notion of a generalized fiduciary obligation upon “high corporate officers” to correct others’ omissions or inaccuracies, what the Government also called a “corporate spokesman fiduciary duty,” finds no basis in 15 U.S.C. § 78j(b) or Rule 10b-5.

The Court also addressed a Daubert ruling limiting the Government’s proof of the materiality of certain charged affirmative misstatements by the defendants. In so doing, it noted that the Government’s proposed use of an expert to link a stock-price drop to the making of certain statements was a “widely used” method of proof of materiality, but that a party could also rely on fact testimony from analysts or corporate employees that wholesale inventory levels were material to either investment decisions or financial forecasts.

Reading the Third Circuit's opinion is also commended in order to appreciate the district court’s very active, and detailed, management and criticism of the Government’s shifting and conflicting theories of prosecution. Defense counsel had not only obtained a constraining bill of particulars in the trial court, but persuaded the judge to extract stipulations from the Government to confine it to particular theories of securities fraud, leading to success on appeal and probably improving the prospects at the eventual trial.
 

• Print
• Comments
• Trackbacks
• Share Link

The Tenth Circuit recently joined the Third Circuit in upholding against a Daubert and FRE 702 challenge the admissibility of fingerprint identification.  In United States v. Baines, 2009 U.S. App. LEXIS 15945 (10th Cir., July 20, 2009), the appeals court affirmed a trial court's decision to admit fingerprint identification testimony which implicated Baines in the possession of certain weapons.

FRE 702  requires, inter alia, that expert testimony result from the application of reliable principles and methods, and the Supreme Court in Daubert set forth a series of criteria against which to measure those methods and principles, including testing; peer review and publication; potential error rates; standards of operation; and general acceptance in the relevant community.  Daubert v. Merrell Dow Pharm., 509 U.S. 579, 594-94 (1993).  It was clear from the record below, which included pretrial testimony from an FBI fingerprint specialist,  that the government could not establish several of the Daubert criteria -- the process of reviewing known against latent prints is not measured by the FBI for error rates, because no such statistics are kept; no objective standards for comparison exist, and the FBI admittedly applies subjective criteria; and there is little or no peer review.

Nevertheless, the Baines court upheld the testimony's admissibility.  The Daubert criteria, the Tenth Circuit, emphasized, are flexible and fingerprint analysis is not really the kind of scientific testimony at which Daubert was aimed, and is more akin to technical expertise.  Applying a relaxed version of the Daubert criteria, the Baines court agreed with the Third Circuit opinion in United States v. Mitchell, 365 F.3d 215 (3d Cir. 2004) that, under an abuse of discretion standard, the trial court's decision to admit the testimony was not erroneous.

• Print
• Comments
• Trackbacks
• Share Link

A lengthy ruling and opinion from an en banc Tenth Circuit upheld the insider trading conviction of Joseph Nacchio, the former CEO of Qwest Communications, and further held that the trial judge properly excluded a defense expert’s opinion testimony under FRE 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). United States v. Joseph P. Nacchio¸ Docket No. 07-1311 (Feb. 25, 2009). The ruling and opinion overruled a prior panel opinion, and reinstated Nacchio’s conviction.

The defense disclosed the expert three days before trial and provided the government with his C.V. and a summary of his testimony. Because the disclosure did not contain the basis for the expert’s opinions as required by Criminal Rule 16, the trial judge ordered the defense to provide a compliant disclosure. The disclosure was to comply both with Rule 16 and the evidentiary rules regarding expert testimony (e.g. FRE 702). The government sought to exclude the revised report under Criminal Rule 16, FRE 702, and Daubert.

Citing Daubert, FRE 702, Criminal Rule 16, and other grounds not critical to this analysis, the trial judge excluded the expert’s opinion testimony largely because the defense failed to establish that the opinions resulted from reliable principles and methods and that the expert applied those principles in the analysis at hand.

The en banc Tenth Circuit focused on the Daubert and FRE 702 rationale in upholding the expert’s exclusion and reinstating Nacchio’s conviction. Further, the court rejected the defense argument that it was entitled to establish the admissibility of the expert’s opinions on the stand, where he would have been subject to voir dire by the government. In this case, the government’s submissions and the trial judge’s instructions to the parties placed the defense on notice that providing notice under Criminal Rule 16 would be insufficient to get the expert to the stand, and that the defense would have to address the government’s objections under Daubert and FRE 702. The defense’s failure to address the Daubert and FRE 702 issues (the defense almost exclusively focused on Criminal Rule 16 in its submissions) was a strategic miscalculation, and, the en banc Tenth Circuit held, it was within the trial judge’s discretion to exclude the expert’s opinions under Daubert and FRE 702.

The impact of the en banc ruling and reasoning is twofold. First, the opinion signals that a trial court may, in its discretion and on appropriate notice, exceed Criminal Rule 16 requirements and obligate parties to establish a proffered expert’s compliance with Daubert and FRE 702 before allowing the expert to testify. Second, as in civil cases, it is not sufficient to show that the proffered expert is “qualified” in the general sense. Rather, in addition to having the appropriate qualifications, the proffered expert must demonstrate an application of reliable methods and principles to the facts of the particular case.
 

 

(With appreciation to Eric E. Reed, Esq., for contributing this entry)

• Print
• Comments
• Trackbacks
• Share Link

Another example of the wide berth given to non-scientific expert testimony under Daubert is United States v. Poulsen, 543 F. Supp. 2d 809 (S.D. Ohio 2008). In that health care fraud case, the defendant proposed to elicit the testimony of Wayne Barnes, a former FBI agent who had in his government career worked health care fraud cases, to the effect that the government “did not conduct a proper investigation, nor do they have the necessary understanding of the health care industry and fraud within the industry.”

The government sought on two grounds to preclude this unusual testimony. First the government argued that Mr. Barnes’ testimony failed the Daubert reliability test in that the test failed to identify any industry standards or testing methodologies upon which he had relied. The district court rejected the argument, noting that under Sixth Circuit precedent the reliability of “specialized knowledge” (as opposed to scientific) expert testimony could not be measured by a strict application of the Daubert factors. Experience-based testimony satisfies Daubert’s reliability requirements.

Second, and more obviously, the government argued that Mr. Barnes’ testimony was irrelevant. This argument should have carried the day, since the depth of the prosecution’s understanding of an industry, or the completeness of its investigation, are not matters which in the ordinary case assist the jury in determining whether there has been proof beyond a reasonable doubt of the essential elements of the offense.

Yet, the district court rejected the relevance objection, too. The court held that expert testimony – just as much as cross-examination of law enforcement witnesses – which tends to show that the government failed to follow leads, misinterpreted information, or used investigative techniques “could be probative of whether the Government has made its case against Defendants.”

We do not know if the government is seeking an interlocutory appeal, but at least until it is reversed the Paulsen decision would support a broad array of expert testimony attacking the government’s general competence in conducting its investigation.

• Print
• Comments
• Trackbacks
• Share Link